[Congressional Record Volume 150, Number 55 (Tuesday, April 27, 2004)]
[Senate]
[Pages S4397-S4402]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


    INTERNET TAX NONDISCRIMINATION ACT--MOTION TO PROCEED--Continued

  The PRESIDING OFFICER. In my capacity as the Senator from the State 
of Ohio, I suggest the absence of a quorum.
  The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, there is a quorum call in effect at this 
stage. How is the time being charged?
  The PRESIDING OFFICER. The time is not being charged.
  Mr. REID. I ask unanimous consent that the time be charged equally 
against the three who will control time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. Mr. President, how much time remains?
  The PRESIDING OFFICER. The Senator has 18\1/2\ minutes.
  Mr. McCAIN. Mr. President, I yield myself 4 minutes.
  Mr. President, I have here in my hand a document prepared by the 
National Governors Association that expresses support for extending the 
Federal ban on State and local taxation of Internet access, so long as 
the moratorium respects three principles. One: Do no harm to State and 
local revenues. Two: Be clear about what services are covered by the 
moratorium to ensure that voice services and other services that use 
the Internet are excluded from the scope of the moratorium. Three: Stay 
flexible by extending the moratorium temporarily. These are the same 
principles that Senator Alexander and others have stated they want to 
respect.
  I agree with these principles, which is why I will offer today a 
compromise amendment to S. 150, the Internet Tax Non-discrimination 
Act.
  The amendment would ensure that a significant portion--in fact, an 
overwhelming portion--of State and local telecommunications services 
tax revenues would remain protected. This means that almost $20 billion 
of revenue would not be impacted by the proposal that I support. I 
would contrast this with the $18 billion that the NGA claims the 
version of S. 150 that passed in the House last year would cost State 
and local governments, and the almost $12 billion that the association 
claims S. 150 would take away from States and localities.
  I respectfully submit that the relatively small impact that the 
compromise amendment would have on States and local revenues would stem 
primarily from our wish to treat all States equally under this 
moratorium. Still, to accommodate the States that were taxing the 
Internet in 1998 when the moratorium was first enacted, the amendment 
would propose to give those States 3 more years of Internet access tax 
revenues. The compromise amendment would even permit those States that 
were not originally grandfathered but that nevertheless have begun 
taxing Internet access 2 years of additional revenue.
  The NGA has also asked for clarity in the definition of Internet 
access. I agree that there should be clarity in this matter. To that 
end, the compromise amendment provides as plainly as possible that it 
would not prohibit States and localities from taxing traditional 
telephone services, voice services that use the Internet, and other 
services that use the Internet. The amendment also makes clear that e-
mail could not be taxed by the compromise amendment. Once again, I have 
respected another core principle of the NGA in the matter.
  And finally, the NGA seeks a temporary, rather than a permanent 
extension of the moratorium under the premise that, as the association 
and Senator Alexander say ``A temporary solution is better than 
permanent confusion.'' The compromise amendment would extend the 
moratorium for a period of 4 years from November 1, 2003. Simply put, 
anything shorter would put us back on this floor debating this measure 
right after it is signed by the President.
  So I remind my colleagues: What I will offer today does very clearly 
address the concerns raised by the NGA and other State and local 
groups. I hope, therefore, that my colleagues will support me in 
passing this reasonable compromise.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Mr. President, I thank the Senator from Arizona for 
his courtesy, his hard work, and his meetings on a complex issue, about 
which there are differences of opinion. People might wonder why are we 
having a hard time agreeing. One of the reasons is we have a difference 
of opinion, which I will talk about in a minute. A second is that 
sometimes even when we agree, when we sit down and try to write down 
what we agree on, we then disagree.
  I am not sure if that is because we don't agree, or because our 
staffs have missed the boat, or because we Senators are not as wise as 
we should be. But let me be responsive to Senator McCain, because he 
has come to the table with a specific proposal. I appreciate that. We 
got that yesterday afternoon and we read it carefully last night, and I 
sent him a letter which he got just a little while ago. I tried to say 
to him my thanks for it. I identified four areas which are the 
principles he just talked about that I see as concerns and four ways to 
fix the problems.
  He then asked me if I would be willing to offer an amendment to fix 
the problems, and I am preparing such an amendment to do that. But 
maybe we can speed that up. Let me go through the points he made and 
say where I have concern.
  The first problem with the most recent McCain proposal is the 
definition. The definition is basically the same definition as in the 
last proposal, which is the Allen-Wyden bill. It does not simply extend 
the moratorium on State and local taxes on Internet access; it broadens 
the definition to include business taxes State and local governments 
collect, and those business taxes amount to a half billion dollars a 
year. That is the first problem.
  How would we fix it? We would fix it by adopting the narrower 
definition of the Alexander-Carper amendment which was introduced 6 
months ago with 11 bipartisan sponsors, or we could go to the original 
definition that was in the 1998 moratorium.
  Let's remember what we are talking about here. Everybody is saying we 
have had a moratorium since 1998 that says, let's not allow State and 
local governments to tax Internet access. Certainly access is a very 
little thing. It was just the connection between you and AOL at the 
time it was passed. Now it is the connection between you and a variety 
of people--maybe the connection between you and your telephone company 
providing high-speed Internet access, your cable company providing 
high-speed Internet access, or it may be between you and DIRECTV 
providing high-speed Internet access, or in Manassas, VA, they provide 
it to you by the electric company. So it is just you and your provider.
  The problem with this definition--it is the same problem with the 
definition of the distinguished Senator from Virginia--is that it 
broadens that, not to include just the end user and the provider, but 
the business taxes, the whole process. It would be as if we were to 
say, OK, we want to pass a Federal law saying in Virginia and Arizona 
and Tennessee you can't tax hybrid cars. You can't collect State taxes 
on hybrid cars because that will help clean the air. We will pass a 
Federal law: No State tax. But not just the sales tax on the hybrid 
car, also on the sales taxes that might apply to the supplier tier 1, 
supplier tier 2, supplier tier 3, and all the way back to the supplier 
of steel for the raw material.
  That is the first problem. It is the same old definition, and that is 
the biggest problem. The fix would be just, if all we are doing is 
extending the 1998

[[Page S4398]]

moratorium another 4 years so Congress can work on this 
comprehensively, why don't we use that definition? That would be No. 1.
  No. 2, Senator McCain says and Senator Allen said in a debate we had 
at Heritage--and if I am misrepresenting their point of view, I hope 
they will correct me--that it was not the intent of their legislation 
to stop States from taxing telephone services, including telephone 
calls made over the Internet. It was not their intention to preclude 
State and local governments from taxing telephone services including 
telephone calls made over the Internet.
  I would respectfully submit if that is their intention, the newest 
McCain proposal does not do that. Perhaps, if he doesn't intend to do 
that, our staffs could meet and we could work that out, or I could 
offer an amendment to try to fix it. If I were offering an amendment, 
it would simply say: Nothing in this act would preclude State and local 
governments from taxing telephone services, including telephone calls 
made over the Internet.
  That is the second issue. That is a big issue because certain local 
governments collect $18 billion a year in State and local taxes. We may 
not like that but that is what they do. They choose to do that in 
Tennessee and Texas instead of imposing a State income tax. They prefer 
to do that instead of putting a higher tax on food. That is their 
decision. I don't think we intend by this bill which purports to just 
extend the Internet access moratorium to decide the huge question of 
whether State and local governments should be permitted to tax 
telephone calls. Senator Sununu has a bill on the subject. He has done 
that in the normal order, and it will be considered by the Commerce 
Committee of which Senator McCain is chairman. That is the place for 
that. That is No. 2. Maybe that is just a misunderstanding. If we both 
want the same thing, we ought to be able to write that down. Senator 
Allen and I have trouble in doing that.
  Mr. WYDEN. Mr. President, will the Senator yield?
  Mr. ALEXANDER. I would like to finish with the other points, and then 
of course I will.
  The other two points are on duration. Four years is better than 
permanent, and I thank the Senator for that. But 4 years is a long 
time. We don't need more than 15 months or 2 years for the Commerce 
Committee and the Congress to look at this in a comprehensive way.
  What I am afraid of is once we make a fix here it will never get out 
of the law. And if we get the wrong definition in here, or if somehow I 
am right but I am defeated and the result is that we really do ban 
State and local governments from collecting taxes on telephone 
services, then we will have driven a hole through State and local 
budgets that we didn't intend.
  Finally, on the grandfather clauses, I think they should all end at 
the same time the moratorium ends, whenever that ends.
  Those are four points, and that is not many points. If they were all 
fixed, I could go for the bill, and maybe some other people could as 
well.
  Let me conclude with this, and I will be glad to yield to someone 
else, including Senator Wyden.
  The reason I am on the floor has nothing to do at all with the 
Internet. It has everything to do with my view of federalism. I do not 
think we should be passing laws that cost money and send the bill to 
State and local governments. I think we promised not to do that.
  The way I read Senator McCain's proposal is it costs at least $\1/2\ 
billion a year to State and local governments with his view of the 
definition. If the telephone language isn't fixed, it is $3 billion to 
$10 billion a year, according to the Congressional Budget Office. The 
grandfather clauses which exist at least in 27 States today where they 
are collecting taxes on Internet access are $200 million or $300 
million a year. Those are significant dollars.
  I wish I could find a more effective way to say this. If we want to 
give another subsidy to high-speed Internet access, which is the most 
rapidly growing technology in America, according to the New York Times 
of last week, and which has $4 billion in Federal subsidies and 
subsidies from every State, if we want to give one more subsidy to this 
business, then why don't we pay for it? Why don't we pay for it instead 
of sending the bill to local governments? I am afraid this compromise 
doesn't do that.
  I have mentioned this several times. I would like to mention it 
again. I am preparing an amendment on this. President Bush's plan in 
1999 when he was Governor of Texas exempted the first $25 that you pay 
on high-speed Internet access. It was exempted from taxation in Texas. 
That might cost you $1 to $3 a month. That is what we are talking 
about.
  Everybody in Manassas, VA, can get high-speed Internet access for $25 
from their electric company.
  The Governors, State and local governments asked us to pass the Texas 
plan--to pass the Bush plan. But we are insisting on passing another 
plan that doesn't benefit the consumers. It benefits the most highly 
subsidized technology company that I can find, if we have time--and we 
will have time later--I have a book called ``The Nation of Laboratory 
Broadband Policy Experiences in the States.'' It details all of the 
wonderful State and local subsidies that are now being granted in 
addition to the $4 billion.
  Put the subsidies aside. My major concern is if we want to impose a 
cost on State and local governments, we should not break our promise of 
1995, which was: No money, no mandate. If we break our promise, throw 
us out.
  I am afraid that the McCain substitute breaks the promise. I would 
like to work with Senator McCain to resolve those last four 
differences. I look forward to the opportunity of joining with him, 
Senator Allen, and Senator Wyden in coming to a result quickly this 
week.
  Mr. WYDEN. Mr. President, will the Senator yield?
  Mr. ALEXANDER. Yes.
  Mr. WYDEN. I appreciate the Senator yielding. He has been very 
gracious.
  Mr. ALEXANDER. I yield on the Senator's time.
  Mr. McCAIN. Mr. President, I yield 3 minutes to the Senator from 
Oregon.
  Mr. WYDEN. Mr. President, I want to ask the Senator a question 
because I have the sense that the Senator from Tennessee thinks we 
ought to just use the 1998 definition of Internet access. Is that 
correct? Is that what the Senator from Tennessee is saying?
  Mr. ALEXANDER. I thank the Senator for his question. I suggest that 
the 1998 definition is a better definition than the one in the latest 
McCain proposal. The best definition is in the Alexander-Carper 
compromise in December, but in the interest of trying to get to a 
result, I could vote for either one of those two definitions.
  Mr. WYDEN. What concerns me is that both the 1998 definition and the 
proposal of the Senator from Tennessee essentially discriminates 
against the future because the future is about broadband, particularly 
for rural areas, for job creation, and highly skilled jobs. If you use 
the 1998 definition, or essentially the Senator's proposal for just 
Internet access--I emphasis that is all we are talking about, Internet 
access--what you will have is a situation where folks could get 
Internet access through cable and those folks end up essentially 
getting a free ride. But if you get the Internet access and future DSL, 
you are going to get taxed.
  That is why Senator McCain and I and others would like to essentially 
continue the 7-year path we have had which is to promote technological 
neutrality--not to advantage one technology against another.
  On the question of Internet access, which is what the President 
talked about yesterday where he said he doesn't want to see Internet 
access get taxed, that is what is in the McCain proposal. That is what 
I was trying to do. Unfortunately, that is not in the Senator's 
proposal or in the 1998 definition.
  What will happen is this country will have the technology policy that 
discriminates against the future and discriminates against the field in 
which it is going to create highly skilled jobs.
  By the way, cable isn't going to be serving those rural areas. It is 
going to be broadband and DSL which serves them.
  I very much appreciate the Senator from Arizona yielding me this 
time. We have clarified an important concept. Both in the 1998 
definition that the Senator from Tennessee said he would

[[Page S4399]]

be for or his compromise, in my view, would have the Senate taking a 
position with respect to the future of the Internet and with respect to 
the future of technology that would not be in the public interest.
  I thank my colleague from Arizona for yielding me the time.
  I wrap up by way of saying I am going to continue to work with the 
Senator from Tennessee who has been very thoughtful and generous with 
his time. We can find a common ground.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. ALEXANDER. Mr. President, how much time do I have?
  The PRESIDING OFFICER. Six and one-half minutes.
  Mr. ALEXANDER. Mr. President, I wish to make two points to the 
Senator from Oregon who has worked hard on this legislation from the 
very beginning. He is an original cosponsor.
  No. 1, he is right about the 1998 definition. It isn't high-speed 
Internet access. There is a difference between the way high-speed 
Internet access offered over a telephone line and high-speed Internet 
access offered over a cable is treated.
  But there are two solutions to that. One is, the Ninth Circuit just 
solved the problem--the Ninth Circuit Court of Appeals--by treating 
them the same. Now that is on appeal to the Supreme Court. So whatever 
we do here might be changed by the courts. That is why we need a short 
moratorium, so Senator McCain's committee and your committee can go 
into a comprehensive look and solve this whole problem over the next 2 
years. We are ready to do that. The FCC is ready to do that.
  The second answer is, the Alexander-Carper amendment endeavors to 
treat all providers of high-speed Internet access the same. It is the 
best we can do from here. If the courts and the FCC do something in 
addition to that, we cannot control it.
  Finally, I am concerned about the digital divide, too. But if power 
companies are going to be offering high-speed Internet access in 
Manassas, VA, which they do for $25 a month--thanks to the Rural 
Electrification Association, everybody is going to have high-speed 
Internet access available to them if they have an electric wire to 
their house. If they do not, DirecTV will sell it to them from the sky, 
or their telephone company will sell it to them, or their cable company 
will sell it to them. Yet another way may be invented.
  So I do not think we have any problem with encouraging high-speed 
Internet access. It is the fastest growing technology in America today. 
It is the most heavily subsidized. They are giving it away in LaGrange, 
GA, and only about half the people will take it. It is coming. It is 
available. But if we are going to give any kind of subsidy, let's pay 
for it here. Let's not send the bill to State and local governments.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, I yield 2 minutes to the Senator from 
Oregon.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, again, I want to make it clear to the 
Senator from Tennessee, I am anxious to work with him. But what we have 
seen, essentially, in this iteration of the debate, is a dusting off of 
the same arguments we have heard on the floor of the Senate in the 
past, that somehow this is going to result in extraordinary losses of 
revenue.
  For example, in 1997, we were told by a number of the organizations 
at the State and local level that this was going to produce massive 
losses of revenue. In fact, the exact quote is: Our efforts, the 
efforts of Senator McCain and I, and others, in 1997, would lead to a 
collapse of the State and local revenue system. The very next year, the 
year after we passed our first moratorium on multiple and 
discriminatory Internet taxes, we saw revenue go up $7 billion. So we 
have had essentially all of these dire projections, these calamitous 
projections year after year--and I put them all in the Record--and they 
have not come to pass.
  The reason they have not come to pass is that nobody is talking about 
the Internet getting a free ride. All we have said, from the very 
beginning, is that under this legislation you have to treat the online 
world like you treat the offline world.
  When I came to the floor of the Senate with the distinguished 
chairman of the Commerce Committee on this more than 7 years ago--and 
folks probably found this subject even more difficult then than they do 
now; I know that is hard to believe--we said: Look, if you buy the 
newspaper--essentially ``snail mail''--you are not paying any taxes, 
but if you buy the newspaper in the interactive edition, you pay a tax.
  That was discriminatory. All we have tried to do over the last 7 
years is essentially keep that principle in place and allow it to 
evolve with the technology. So for 7 years this has been about 
technology neutrality and dealing with these questions of State and 
local finance. The States have not lost money as a result of our making 
sure that you are not going to see multiple and discriminatory taxes on 
Internet access.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. McCAIN. Mr. President, I yield myself 1 minute.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, I appreciate the letter from the Senator 
from Tennessee. My understanding is, he has four major concerns. I hope 
to work with him to resolve these concerns. If not, I hope we will see 
amendments and let the Senate work its will as to whether those 
concerns are valid in the view of a majority of the Senate. I look 
forward to seeing and debating and voting on these amendments.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. Four minutes.
  Mr. ALEXANDER. Mr. President, I thank the Senator from Arizona and 
look forward to doing that.
  If I may continue the discussion for a moment with the Senator from 
Oregon, the reason State and local governments did not lose much money 
in the last few years from the moratorium on State and local taxation 
is because, one, there was a very narrow definition--narrower than the 
one this latest proposal and your proposal makes. You broaden the 
definition to include the whole Internet access backbone. You are not 
just talking about the connection between the end user and provider; 
you are talking about this backbone. You are talking about the normal 
business taxes that any other business would pay.
  The other thing is, high-speed Internet access really had not arrived 
5 or 6 years ago. It has arrived today. It is the fastest-growing 
technology. If we make a mistake on the telephone section of this bill, 
we will drive a Mack truck through State and local governments, and we 
can rename this bill the ``Higher Local Property Tax'' bill of 2004 or 
the ``State Income Tax Bill in Tennessee'' or the ``State Income Tax 
Bill in Texas,'' because if you take away hundreds of millions of 
dollars from State and local governments--or billions of dollars 
eventually--they have to look for another source of revenue. They may 
cut government some, but they will have to look for another source of 
revenue. We should be neutral about it. Ronald Reagan, the Republican 
Party--we have stood on the notion that we would return more 
responsibility, return more decisionmaking to local governments.
  I urge my colleagues to look carefully at this legislation and vote 
for something that does no harm to State and local governments, and 
vote for something that gives the Commerce Committee a short time to 
figure this out properly, and vote for something that does not give an 
unnecessary benefit, unnecessary subsidy to what I judge to be already 
the most heavily subsidized and fastest growing new technology existing 
in the United States today.
  I yield the floor.
  Mr. McCAIN. Mr. President, how much time remains?
  The PRESIDING OFFICER. The Senator from Arizona has 9 minutes, the 
Senator from Tennessee has 1 minute 15 seconds, and the Senator from 
North Dakota has 18\1/2\ minutes.
  The Senator from North Dakota.
  Mr. DORGAN. Mr. President, it is obvious from the most recent 
discussion

[[Page S4400]]

between my colleagues--Senator Alexander, Senator Wyden, and others--
that if this had been easy to fix, it would have been fixed.
  I talked to Senator McCain last evening before we broke, and we 
talked a bit about the process that brought this bill to the floor of 
the Senate. This bill came from the Commerce Committee. We tried, 
during the markup in the Commerce Committee, to reach an agreement 
about the definition. The definition is really the critical piece here, 
and we were not successful in the committee.
  We agreed, when we reported it out of the Commerce Committee, that we 
would continue to work to try to see if we could find an acceptable 
definition that would represent a compromise. Frankly, we did that. 
Senator McCain kept his word. We all continued to talk and work to see 
if, before we brought this bill to the floor, we would have that 
agreement. But the fact is, we did not reach an agreement. So now we 
have very differing views about exactly how we should proceed.
  For my purpose, it does not matter to me whether the moratorium is 1 
year, 2 years, 5 years. That is much less relevant to me than the 
question of this definition, of exactly what cannot be taxed, exactly 
what we are doing with the definition, exactly what consequences that 
definition would have on State and local revenues, and on the taxation 
of certain products and services. The determination of how we create a 
definition that represents the interests that all of us want is what is 
critical. At this point, we have been unable to do that.
  So my hope would be that while this bill is on the floor of the 
Senate, we can find a way to reach a compromise that is satisfactory. 
At this point, I would not support the underlying bill that is on the 
floor with the definition as it currently exists. But what we ought to 
do is find a way by which we create a definition that does exactly what 
the Senate wants it to do, without being broader than is necessary to 
substantially erode the revenue base that now exists with State and 
local governments. I think that is possible, but it is not easy.
  Listening to the discussion of Senator Alexander and Senator Wyden 
and others demonstrates this is very complicated. It happens I have 
worked in this area for some while because of the issue Senator Enzi 
and I have worked on, which is not a part of this discussion today, but 
the one in which we talk about the issue of the consumption tax that 
exists when you buy a product, for example, from a catalog, from a 
remote seller, or perhaps over the Internet. When you purchase that 
product over the Internet or from a catalog, you actually owe a tax; 
you just don't pay it. Nobody pays that tax or almost no one pays the 
tax. It is called a use tax.
  The use tax is applied when the sales tax is not collected. But no 
one pays, or almost no one pays the use tax. So there is a substantial 
amount of money being lost to State and local governments for the 
support of schools and other services.
  In addition, the folks on Main Street who actually sell the product 
from their storefront must charge the tax, and their competitor over 
the Internet sells without charging a tax. So there is a competitive 
issue that is a problem for local businesses as well. But the issue 
Senator Enzi and I and many others are concerned about and want to fix 
is not a part of the discussion. This is a narrower discussion about 
the moratorium that previously existed with respect to the imposition 
of a tax on the connection to the Internet. I have no disagreement with 
respect to the goals of those who want to prevent taxing ``the Internet 
connection'' in order not to retard the growth of broadband and the 
buildout of the infrastructure. We have no disagreement about that. I 
support the moratorium. I supported the previous moratorium. Again, it 
is of little matter to me whether it is 1 year or 5 years or even 
longer.
  What is of great moment to me is how this definition is written. 
Because if it is written inappropriately, there could be a very 
significant set of unintended consequences that could be very costly to 
State and local governments and to their ability to fund education and 
other matters.
  In summary, what I say is this: The bill is on the floor at the 
moment. One of the central pieces of the bill is at this point in great 
dispute. Unless we can find a way to negotiate a compromise on that 
definition, my guess is this legislation will not advance. I would 
prefer that it does advance. I hope we can find a compromise in the 
coming hours and days so that we write this definition in a manner that 
expresses the intent of the Senate and are able to move the legislation 
forward.
  I yield the floor and reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. DORGAN. Mr. President, I suggest the absence of a quorum and ask 
unanimous consent that the time be equally charged to both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. WYDEN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Who yields time?
  Mr. WYDEN. I believe this time should be taken from the time 
allocated to Chairman McCain.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WYDEN. Mr. President, Chairman McCain, I and others who have 
worked on this effort to try to find common ground thought it was 
important early on to begin efforts to find some areas of agreement 
that would bring the sides together. Let me outline 10 particular areas 
of compromise we have essentially offered in the managers' proposal.
  I, for example, strongly believe there should be a permanent ban on 
multiple and discriminatory taxes on Internet access. But in the name 
of trying to find a compromise, now we have a 4-year moratorium. We 
have a 3-year phaseout of the grandfather clause. This was something 
that was important to the States. We have a 2-year grandfather of taxes 
on DSL. Again, as I talked earlier, that is the technology of the 
future.
  A fourth compromise reflects the concern about voiceover. What we 
have done is clarified that our legislation is not going to affect 
taxation of voice communication services utilizing the voiceover 
Internet protocol. We have clarified the taxes that would be covered, 
addressed a number of concerns the States had with respect to income 
and property taxes. We want to make sure those taxes, those 
opportunities for State and local revenue are protected.
  We clarified the House language on DSL which was something State and 
local groups complained was too open-ended and vague.
  With respect to the bundling of services, States and localities asked 
for a clear and uniform accounting rule. We protected universal 
services. We protected e-911 taxes, and we also made clear nontax 
regulatory powers would not be affected.
  I thank the chairman for this time. I only wanted the Senate to know 
that as you tried to bring both sides together, there were 10 specific 
areas of compromise that were offered. I thank him for the time.
  Mr. McCAIN. Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. Six minutes 40 seconds.
  Mr. McCAIN. Mr. President, I reserve 5 minutes for the Senator from 
Virginia when he arrives. I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from North 
Dakota.
  Mr. DORGAN. Mr. President, I yield myself such time as I may consume.
  Let me, in response to my colleague from Oregon, say once again I 
believe we ought to pass this legislation dealing with a moratorium. 
There might be 5, 10, 15, or 50 areas in which we have worked to try to 
reach compromise. I don't know the exact number, but I would not 
dispute that. I simply say again: The problem remains the definition of 
what is determined to be in the law that represents the moratorium 
impact; that is, what is the definition of the Internet service? What 
exactly are you precluding from a State and local tax base? Is it now 
taxed? Would it be taxed in the future. It is obviously very 
complicated. If it were not complicated, I believe Senator Alexander

[[Page S4401]]

and Senator Allen and Senator Voinovich and others would have long ago 
reached a compromise. But that has not been the case.
  Perhaps one of the things we could do during this discussion and the 
ensuing debate today, tomorrow, and beyond, if that is what it takes, 
is at least begin to understand exactly what is in the compromise that 
is being proposed and what is in the legislation that has been offered 
by Senator Alexander and Senator Carper in their 2-year moratorium, 
called S. 2084. But again, if this were easy, compromise would already 
have been reached. It is not easy. It is very complicated and difficult 
and hard to understand.
  I have been in a good number of meetings in which it appears to me 
virtually everyone, including myself, failed to understand what we were 
debating, but we debated it aggressively nonetheless. My hope is we can 
do better than that this time. We have had a good start with some of 
the discussion back and forth earlier today.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia has 5 minutes.
  Mr. ALLEN. Mr. President, I would like to address this issue as it 
lays right now as we are moving to proceed, and some of the 
misinformation, mischaracterizations of where we are. This issue is not 
a novel or new one for the Senate. We have debated this in the 
committee. It has been on the floor. Senator Wyden and I were ready to 
roll with this back in November--a permanent moratorium making sure 
forever there would not be discriminatory taxes, multiple taxes, or 
access taxes for consumers on the Internet. Now we get to this point 
and there are a lot of mischaracterizations.
  The Senator from Arizona, chairman of the Commerce Committee, has 
come up with a proposal, an amendment to the bill, which is not 
permanent. To me it is not ideal. It is not perfect. But a lot of what 
happens in the Senate fails to meet that standard of ideal and perfect. 
Once in a while, one has to be practical, pragmatic, and sometimes cut 
back on what you think is the ideal.
  This amendment of the Senator from Arizona is a 4-year moratorium 
rather than a permanent moratorium. I look at a ``Dear Colleague'' 
letter from some of my colleagues, Senator Carper and Senator 
Alexander, and they say: A moratorium of 4 years, that is tantamount to 
a permanent moratorium while they argue for a 2-year extension of a 
moratorium.
  Well, if 4 years is permanent, I guess whoever gets elected President 
next year is going to be there permanently; Senators with a 6-year 
term, that must be ad infinitum. Four years is temporary; it is not 
ideal. I would prefer it to be permanent, and the reason I would like 
it to be permanent is because companies have to invest millions, tens 
of millions of dollars, if they are going to get broadband out, 
especially small towns and rural areas. In the event there is a shorter 
duration, then that means it is less likely that there will be 
stability, predictability, and confidence that the laws will stay the 
same. Anyone, even those with a fourth grade education--at least those 
students who have the benefit of Virginia's standards of learning--will 
understand that if you tax something, fewer people will be able to 
afford it.

  The question before the Senate is whether we want to have Internet 
access and the Internet service monthly bills to be burdened with, on 
average, about a 17-percent tax, as is the case on telephone bills. 
Senator Wyden, myself, and many others believe that if we want more 
people to have access to broadband and the Internet, then the best way 
is not to burden it with regulations or taxes. This is particularly 
true for those with lower incomes and those in rural areas and small 
towns, who need access to the ability to conduct commerce, access to 
education, access to telemedicine--access to all forms of information, 
which is key to competitiveness these days.
  The grandfather clause has also been changed from the bill Senator 
Wyden and I originally introduced. We wanted to stop those who found a 
loophole in the original moratorium and started taxing the backbone of 
the Internet. They are taxing that and, of course, ultimately the 
consumer has to pay for those taxes. We wanted to stop that 
immediately. Senator McCain's amendment gives those States greater 
leeway and gives them up to 2 years to wean themselves off of this 
latest loophole for taxation. For those who have been taxing prior to 
1998--and many States are still taxing--although States such as Iowa, 
South Carolina, Connecticut, and the District of Columbia, which were 
grandfathered, have stopped taxing Internet access. But other States 
are continuing to do so. Senator McCain's amendment--unlike what the 
House did, which was stopping these States from taxing instantly--gives 
them 3 years to wean themselves off of it.
  The compromise that Senator McCain put forward, to me, is not ideal; 
it is beneficial, though, in that at least for the next 4 years we are 
protecting consumers from being hit with these burdensome, 
counterproductive, undesirable taxes on their access to the Internet. 
While not perfect, it is a measure that we can move forward with. It 
will have the Senate on record as not being in favor of taxing access 
to the Internet, but rather on the side of the consumers, on the side 
of freedom, and on the side of opportunity.
  Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. The Senator has used 5 minutes.
  Mr. ALLEN. Therefore, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. DORGAN. Mr. President, how much time remains on each side?
  The PRESIDING OFFICER. The Senator from North Dakota has 10 minutes 
45 seconds. The Senator from Arizona has 1 minute 26 seconds. The 
Senator from Tennessee has 1 minute 15 seconds.
  Mr. DORGAN. Mr. President, I think we are probably ready to go to the 
bill. Let me make a point, however, with respect to my colleague from 
Virginia.
  Look, once again, there is no disagreement in this Chamber about the 
question of whether we would support punitive or discriminatory taxes 
with respect to the Internet. The answer is, of course not. I don't 
care how long the moratorium is for. Let it be forever, as far as I am 
concerned. That is not the issue. The issue with the legislation 
proposed is what kind of definition exists, and what will the impact of 
that definition be on the revenue base of the State and local 
governments?
  If we can get that definition squared away in a thoughtful and 
appropriate way, we ought to pass this 100-0. I regret that that is not 
the case with respect to the compromise offered. That should not 
surprise anybody because this has gone on now for some months. It is 
complicated, and we have found it difficult to reach agreement or an 
acceptable compromise at this point. I expect the likely thing to have 
happen here is we will be on the bill itself and it will be open to 
amendment. We can have amendments, and perhaps second degrees, and we 
will have discussion and votes and find out how the Senate feels about 
the specific definitions.
  Again, the question of whether there should be support for a 
discriminatory or punitive tax on the Internet--that ought not to be a 
question. I think the answer to that is, no, absolutely not. Whether it 
is 1 year, 3 years, or 5 years, that is not a very big issue for me. We 
need, in the coming hours, to focus on the question of, What is the 
right definition? What do we intend to accomplish, and how do we define 
it in a way that is fair to everybody?
  I believe we ought to have public policy that encourages the buildout 
of broadband in this country. I think it will help this country's 
economy and be something that stimulates economic growth in our 
country. Whatever we do with this legislation, I don't want to retard 
the growth of broadband and the development of the Internet. I think 
that I speak for almost all of my colleagues when I say that. Let's 
find a way to write this definition in an appropriate manner and that 
is satisfactory and move ahead. At this point, it hasn't been done even 
with the compromise. We have much work to do to reach that point.
  Mr. President, I ask, does the Senator from Tennessee seek time?
  Mr. ALEXANDER. Yes, I seek 30 to 45 seconds.
  The PRESIDING OFFICER. The Senator from Tennessee is recognized for 
45 seconds.
  Mr. ALEXANDER. Mr. President, I want to simply echo what the 
distinguished Senator from North Dakota

[[Page S4402]]

said. I am perfectly willing and prepared to vote for a short-term ban 
on State and local taxation of pure Internet access, and I have been 
ready to do that since December. So I am for that. I can step over here 
and take my purist position and give you a long argument on why we 
don't need to do that and make that kind of subsidy, but I know there 
are 100 Members here and we all have to pitch in. I am ready to do 
that.
  All we have to fix in the McCain proposal is the definition, which 
the Senator has just mentioned. We have to make clear, in my view, that 
nothing in this bill should preclude State and local governments from 
taxing telephone services, including telephone calls made over the 
Internet. That is two. The short term is three. I prefer 2 years, not 4 
years. The fourth item is the grandfather clause, which ought to be 
easy to fix. They ought to end at the same time the moratorium ends. So 
that is not many points of difference--the definition, telephone calls 
over the Internet, and the term of the grandfather clause.
  The PRESIDING OFFICER. Who yields time?
  Mr. DORGAN. Mr. President, my understanding is that Senator McCain is 
just off the Senate floor and will be returning in a moment. Until he 
returns, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Crapo). Without objection, it is so 
ordered.
  Mr. DORGAN. Mr. President, how much time remains on each side?
  The PRESIDING OFFICER. The Senator from North Dakota has 2 minutes 55 
seconds remaining, and the Senator from Arizona has 1 minute 26 seconds 
remaining.
  Mr. DORGAN. I am prepared to yield back my time if that is the 
intention of the Senator from Arizona. That being the case, I yield 
back my time.
  Mr. McCAIN. Mr. President, I yield back my time.
  The PRESIDING OFFICER. All time having been yielded back, under the 
previous order, the motion to proceed is agreed to.

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